On a pro forma basis, which excludes certain one-time items, Yahoo had net income of $206 million, or $0.15 per share, down 16 percent and 17 percent, respectively, compared to the first quarter of 2008 but exceeding by seven cents per share analysts' expectation.

As had been rumored, Yahoo also announced it will lay off employees, its third major job-cutting round since early 2008. This time around, Yahoo will let go 5 percent of its staff worldwide. Yahoo ended 2008 with 13,600 employees, so this would mean that about 680 people will be laid off. Yahoo handed out pink slips to about 2,600 employees in two rounds of layoffs last year.

In a statement, CEO Carol Bartz said the company "experienced pressure" in display and search advertising, but added that Yahoo will benefit from the recovery of brand advertising when it happens.

"We believe Yahoo remains one of the most compelling advertising buys on the Internet," said Bartz, who took the helm of the company in January.

To comment on this article and other PCWorld content, visit our Facebook page or our Twitter feed.